Here is the typical fee structure of an invoice discounting facility. The fee's listed below are those you can expect to pay beyond your normal factor rate.
Initiation Fee
Most lenders will charge you a nominal initiation fee to get your invoice facility up and running.
Facility Fee
Some lenders will charge a fee beyond your normal factor rate. This will likely be proportional to your loan amount.
Early-Settlement Fee
In some cases, should the invoice against which you have taken out a facility be paid early, the lender may apply an early-settlement fee. Avoid lenders who do this if your client does pay early on occasion.
Is an invoice discounting facility right for your business?
Here are some details which will help you decide whether to take out that invoice factoring facility.
Smaller Financer
Traditional Bank
Funding Amounts
R10k to R5M
R500k to R5M
Speed of Funding
As little as 24 hrs
Multiple weeks
Fee Structure
Fully transparent
Often hidden fee's
Who Qualifies
No collateral required
Needs collateral
Early Settlement Penalties
Discounts for early settlement
Often penalties for early settlement
Repayment Structure
Flexible. Pay as you earn options.
Rigid, inflexible.
Merchant Cash Advance
Traditional Bank Loan
Funding amounts
R10k to R5M
R1M+
Speed of funding application
As fast as 24 hours
Weeks to months
Fee structure
Factor rate
Interest rate
Best for
Business with a card machine
Business that owns a property
Early settlement
No discounts because total loan cost is fixed
Often penalties for early repayment
Repayment structure
You repay proportionally to your earnings. No income = no repayment.
Inflexible repayment structure. Normally over longer-terms.
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